Saving Time and Saving Money: An Optional Flat Tax Will Make All Americans More Prosperous

Note:  This was co-authored by Former House Speaker Newt Gingrich

Nothing is certain except death and taxes, and physicians will tell you that death is much less complicated than the American tax code. 

The complexity of today’s tax code is a consequence of countless deductions and exemptions aimed at promoting a variety of congressionally determined policy agendas.  The result is federal law loaded with opportunities for avoiding taxes and exploiting loopholes at the expense of fellow Americans.  Behind every loophole there is a lobbyist.

Everyone is familiar with the problems inherent in our convoluted tax code.  Criticizing it is as American as apple pie and baseball.  And for good reason.  Each year Americans spend billions of hours and billions of dollars complying with the complex code.  We also spend countless more hours complaining about it.

Time is precious, and often we don’t have enough time for personal priorities like raising our families, cooking dinner, or even spending time with friends.  Then there is the dollars-and-cents side of the equation where time is money and resources are spent navigating tax law instead of spent growing the economy and creating jobs.

Taken together, this argues for a strong prescription of real change: reform the tax code.

When President Reagan cut taxes in 1981, several good things happened.  The economy grew, revenues increased, and jobs were created.

It’s hard to think of better medicine for our ailing economy than replicating successful reform of the tax code on an even greater scale.

How do we do it?  Flatten tax rates; simplify the code; and, shift the burden away from our families and small businesses.   The encouraging news is we have a practical and effective blueprint for delivering this real change across-the-board. It’s called the optional flat tax plan, or the “one page, one rate” tax plan.

In 1981, Robert Hall and Alvin Rabushka proposed a boldly simple tax structure that would transform the Internal Revenue Service and our economy by creating a single rate of taxation for all Americans.

Today, several states have implemented this single rate structure, and from Utah to Massachusetts, citizens are seeing the benefits. 

In Colorado, a single income tax rate generated so much surplus revenue that one lawmaker actually proposed reducing the rate ten years after its implementation, and today the rate is below its original level.  In Indiana, the economy boomed after a single rate went into effect in 2003.  Since that time, corporate income tax receipts have increased by almost 250 percent.  Admiring such success, Governor Mark Sanford of South Carolina currently is pushing for an optional flat tax on Palmetto State income.

In Congress, members like Michael Burgess of Texas, David Dreier of California, and Paul Ryan of Wisconsin are working to establish an optional tax structure for the United States that is flatter and simpler.  Senators Arlen Specter and Sam Brownback support similar measures on the other side of the Capitol.

A faster, flatter, fairer tax structure would be simple: tax returns would be done on a single page, perhaps even on a postcard.  Subtract from your income a standard deduction, multiply the result by a fixed single rate of taxation, and the process is over.  Gone will be the stressful hours spent figuring out whether your military service or marital status will adversely affect your return. No more headaches trying to determine where estimated tax payments go.  Tax preparation fees might be money spent on something more rewarding.

Secondly, a new deduction, which would be above the established poverty level, means an optional flat tax would not unfairly target the poor.  Approximately the lowest 42% of income earners would potentially be exempt from paying taxes altogether, and any taxes they did pay would only be on the amount that exceeded the deduction. 

An optional flat tax would also eliminate the Alternative Minimum Tax.  And if a person had twice as much income as another, he or she would be taxed twice as much.   Furthermore, a single rate tax structure would eliminate taxes on savings, capital gains, and dividends. Saving would increase and businesses would expand to create new jobs.  By reducing dramatically the world’s second highest corporate income tax rate means that U.S. companies would have less incentive to move their jobs abroad. And here is where the all-American principle of freedom comes into the prescription: opting for a one rate, one page tax plan would be entirely left up to the individual or business to decide, not Uncle Sam.

An optional flat tax would save taxpayers more than $100 billion per year and reduce compliance costs by over 90 percent. This is a stimulus package that would have an immediate effect on our American economy.

Recent polling by American Solutions shows that over 80 percent of Americans favor the option of filing taxes on a one page tax return with one rate. After all, who would complain about making something easier, less costly, and less time consuming?

This is a political year, with elections right around the corner. You can't help but hear talk about change. Let's consider how the right change could improve the most complicated of institutions (the IRS), save time, money, and some peace of mind for the taxpayer, and most importantly, deliver enduring prosperity for all Americans. An optional flat tax is a plan for real change worthy of everyone's vote. It’s also a plan that will finally make taxes less complicated than death.